UN: Food prices hit record high in February

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March 11, 2011

ROME (AP) - Global food prices have reached their highest point in 20 years and could increase further because of rising oil prices stemming from the unrest in Libya and the Mideast, a U.N. agency warned March 3.

Skyrocketing food prices have been among the triggers for protests in Egypt, Tunisia and elsewhere, and raised fears of a repeat of the food price crises in 2007 and 2008.

Some experts point to key differences compared to those years: for one, the price of rice, an important food security commodity, is much lower today. Still, Oxfam called the hike "deeply worrying."

The Food and Agriculture Organization said in a statement that its food price index was up 2.2 percent last month, the highest record in both real, inflation-corrected terms and nominal terms since the agency started monitoring prices two decades ago.

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It also was the eighth consecutive month that food prices had risen, the Rome-based agency said. In January, the index had already registered a record peak.

The increase was driven mostly by higher prices of cereals, meat and dairy products, FAO said. Sugar was the only commodity of the groups being monitored whose price hadn't risen.

Global oil prices, which increased on concerns about the potential impact of supply disruptions following unrest in Libya, are a crucial variable.

"Unexpected oil price spikes could further exacerbate an already precarious situation in food markets," said David Hallam, director of FAO's trade and market division. "This adds even more uncertainty concerning the price outlook just as plantings for crops in some of the major growing regions are about to start."

Oil prices affect food markets in many ways, from production to transport costs. One crucial link is through biofuels: when oil prices are high, there is a bigger incentive to produce more biofuels, using crops and driving food prices up, said Abdolreza Abbassian, senior grains economist with FAO.

"This is what happened in 2007-2008," he said in an interview with The Associated Press. "The longer these prices remain high, the more we have to think that it could have a spillover effect into the grain sector, especially in coming weeks and months."

Abbassian noted that compared to the crisis of 2007-08, rice prices today are half what they were then. Global stock